Credit Losses Lower Earnings for Regional Banks

Large regional banks including Fifth Third, Huntington Bancshares and KeyCorp reported lower fourth-quarter earnings, illustrating the breadth and depth of the credit crisis.

REUTERS

A series of large regional banks reported Thursday that rising credit losses led to lower fourth-quarter earnings, illustrating the breadth and depth of the credit crisis and the recession.

The Ohio lenders Fifth Third Bancorp, Huntington Bancshares and KeyCorp posted quarterly losses, as did the Southeast lender SunTrust Banks. Profit fell at the BB&T Corporation and Comerica, while the M&T Bank Corporation posted higher earnings.

Results fell short of analysts’ average forecasts except at BB&T, which matched the consensus, and M&T, which topped forecasts, according to Reuters Estimates.

Comerica announced job cuts, and Huntington and SunTrust lowered their dividends.

“We are under no illusions as to the severity of this credit cycle,” the chief executive of SunTrust, James M. Wells III, said.

Banks are struggling as a troubled economy and tight credit make it harder for consumer and business borrowers to pay their debts and to refinance. Government efforts to jump-start lending are proving less successful than hoped as lenders preserve cash in anticipation of worse times ahead.

“The environment is extraordinarily difficult,” the chief executive of Fifth Third, Kevin T. Kabat, said in a conference call.

Fifth Third’s net loss applicable to shareholders was $2.18 billion, or $3.82 a share, compared with a gain of $16 million, or 3 cents, a year earlier. Nearly half the loss was to write off good will because the value of its banking business fell. The Cincinnati-based lender suffered disproportionate credit weakness in Michigan and Florida. Fifth Third took over deposits of a failed Florida lender, Freedom Bank, last fall.

KeyCorp, which is based in Cleveland, said its net loss from continuing operations was $524 million, or $1.13 a share, compared with a profit of $22 million, or 6 cents, a year earlier. Results included a $420 million good will write-down, and net charge-offs nearly tripled.

Huntington’s net loss was $440.4 million, or $1.20 a share, compared with a loss of $239.3 million, or 65 cents. Much of the loss was tied to the lender’s relationship with Franklin Credit Management, a New Jersey lender to borrowers with troubled credit. Huntington cut its dividend to a penny a share from 13.25 cents.

SunTrust, which is based in Atlanta, posted a loss of $379.2 million, or $1.08 a share, compared with a profit of $3.3 million, or 1 cent, a year earlier. Soured consumer, commercial and real estate loans caused net charge-offs to more than triple. The bank cut its dividend to 10 cents a share, from 54 cents, the second reduction in three months.

Comerica profit fell 97 percent to $3 million, or 2 cents a share, as net charge-offs more than doubled. The lender, based in Dallas, is also cutting 5 percent of its work force, or about 509 jobs, and freezing salaries for the top 20 percent of its employees.

M&T, of Buffalo, bucked the downward earnings trend. Profit rose 57 percent to $102.2 million, or 92 cents a share, though net charge-offs more than doubled.